Gen Z’s New Blueprint for Retirement

Balancing Flexibility with Knowledge Is Key to Their Success

For many, retirement represents the ultimate goal—a golden phase of life when work slows down, and you enjoy the fruits of decades of savings. But for Generation Z, born after 1996, this classic ideal of retirement feels outdated. They’re crafting their own financial paths, characterized more by flexibility and immediate goals than by distant horizons.

Yet, as promising and adaptable as their approaches might be, Gen Z faces significant challenges. The 2024 TIAA Institute study, “From Gap Years to Golden Years,” reveals critical insights into their financial habits, their relationship with retirement, and the unique position they’re in to succeed—if they’re given the tools and guidance they need.

Who is Gen Z?

To begin, it’s essential to understand what shapes Generation Z. They are the most diverse and educated generation in U.S. history, making up 20% of the population. Raised during defining global events such as 9/11, the Great Recession of 2008, and the Covid-19 pandemic, they’ve developed a blend of technological savvy and social awareness that sets them apart.

This is a generation accustomed to instant access to information, but they’ve also entered adulthood under financial pressure. With rising inflation, immense housing costs, and student loan burdens, many of them are focused on surviving the present rather than planning for the future.

Gen Z’s Mixed Approach to Saving

Financial literacy might be more important to Gen Z than any other generation before them simply because they face unique economic conditions. The study highlights a surprising discrepancy within their savings habits. While 84% of Gen Zers save money monthly, their approach leans heavily toward liquidity.

52% rely exclusively on traditional savings accounts to set aside funds, while only 17% invest through after-tax brokerage accounts or retirement-focused investments. When it comes to long-term goals like retirement, the number of committed savers dwindles—only 20% of Gen Zers are actively saving for their golden years. This limited focus on long-term growth can leave them vulnerable as they age, especially given looming concerns over the future of Social Security.

The primary reason for their hesitancy boils down to a knowledge gap. For 35% of those surveyed, a “lack of knowledge about where to start” was the top reason for not saving for retirement. This highlights a critical need for greater education on the importance of long-term investments.

Prioritizing Short-Term Goals Over Long-Term Stability

Unlike older generations, Gen Z has a different set of priorities. Instead of setting money aside for retirement or emergencies, they prefer to focus on immediate ambitions like housing and travel. According to the study, 19% save primarily for travel, 18% for transportation, and 17% for housing costs—all expenses tied to their goals of personal independence and self-expression.

These priorities are understandable given the generational challenge of affording basic needs. For example, Gen Z spends an average of 51% of their monthly budget on housing, which is a significantly higher portion compared to older generations. Planning for something as distant as retirement can feel impossible when they’re already stretching their income to make ends meet.

While this focus on the “now” reflects thoughtful living in the moment, the long-term costs could be enormous. A lack of robust retirement savings leaves Gen Z unprepared for potential hardships, including healthcare needs and rising living costs later in life.

Liquidity and Flexibility

What defines Gen Z’s financial approach is their obsession with flexibility. Saving through liquid options, such as basic savings accounts, gives them more control. This flexibility aligns with their vision of achieving financial freedom rather than focusing solely on traditional retirement.

The TIAA study notes that one in five Gen Zers doesn’t expect to retire at all. Instead, they imagine a future that includes working less, pursuing passion projects, or taking multiple career breaks. Saving money becomes less about an end goal and more about enabling this flexible lifestyle.

Part of this emphasis on liquidity stems from a broader mistrust of traditional financial systems. Platforms like Robinhood and Acorns have gained traction among younger investors because they prioritize accessibility and cultural relevance, catering to this generation’s desire for simplicity and control. However, this same mindset often makes Gen Zers hesitant to fully commit to long-term investment vehicles like 401(k)s. Much of this reluctance can be traced back to a lack of understanding about how these plans work and the substantial benefits they offer, such as employer matches, tax advantages, and compound growth.

Employers Step Up

Despite their reservations, employer-sponsored 401(k) plans have proven to be a major stepping stone into retirement savings for many Gen Zers. According to the study, 66% of those saving for retirement do so through these plans. Features like automatic enrollment and employer matching contributions make 401(k)s an accessible and appealing option, helping bridge the gap between Gen Z's need for liquidity and their long-term financial goals. These programs showcase the potential of traditional systems when adapted to meet the needs of a modern, cautious, and tech-savvy generation.

However, access to these benefits isn’t universal. Black and Hispanic employees are disproportionately less likely to have access to employer-sponsored retirement plans, deepening equity gaps that leave many workers behind. Employers who expand such programs and include educational tools can help young employees take meaningful steps toward securing their financial futures.

A Deficiency in Financial Literacy

The greatest obstacle to Gen Z’s financial success may not be external pressures like inflation or housing costs. Rather, it’s their lack of financial knowledge. According to the study, while 57% of Gen Z respondents believe they make good investment decisions, only 37% were able to correctly answer financial literacy questions.

Gen Z’s confidence in their financial decision-making often masks a deeper challenge—navigating the overwhelming sea of advice available online. Growing up in the technology era, they’ve mastered the art of finding information at their fingertips. But the real difficulty lies in interpreting whether that advice applies to their unique situations. Without proper guidance, many find themselves stuck in a loop of uncertainty, thinking, “I’ll figure this out later.” This inaction, spurred by conflicting advice from online “finfluencers” (financial influencers) and unreliable sources, limits their financial growth.

Further complicating matters, 61% of Gen Zers rely on their parents for financial guidance, which, although helpful, can perpetuate outdated perspectives if the parents themselves lack financial expertise.

Even with seemingly endless online resources, Gen Z could benefit from structured education. 90% of U.S. adults believe personal finance should be taught in high school, according to the National Endowment for Financial Education. Teaching these skills early could bridge the knowledge gap and better prepare young adults for long-term financial success.

Why Professional Guidance Matters

Professional financial guidance could be the game-changer Gen Z needs to secure a stable future. Financial professionals bring more than just expertise—they offer clarity in an overwhelming landscape of generic online advice. By tailoring strategies to fit individual situations, they empower young adults to take control of their financial decisions now rather than postponing essential plans for the future.

For instance, professionals can show Gen Z how to invest without sacrificing liquidity, maximizing opportunities while staying flexible. They can help young workers unlock the full potential of employer benefits, like 401(k) matches, and unravel complex concepts such as healthcare costs, tax-advantaged accounts, and compound interest. These personalized insights turn daunting ideas into manageable steps.

Crucially, this guidance must align with Gen Z’s values and lifestyle. When financial strategies are framed around goals like achieving freedom to travel, pursuing passion projects, or reinventing careers, planning becomes not just practical but inspiring. By connecting long-term saving to the life they want to build, financial professionals can make the process relatable, actionable—and deeply motivating.

Meeting Gen Z Where They Are

To truly support Gen Z, educators, employers, and policymakers must meet them where they are. This generation isn’t opposed to financial planning—they simply need tools that reflect their priorities and help ease their financial anxieties.

Key steps include:

• Financial Literacy Education: Introduce engaging, relatable finance courses into high schools and colleges to equip young adults with practical knowledge.
• Customized Savings Tools: Develop financial products that balance liquidity with long-term growth, allowing Gen Z to feel confident in their investment choices.
• Accessible Employer Programs: Expand retirement plans and offer greater 401(k) matches, especially for underserved communities, to level the playing field.
• Supportive Messaging: Reframe retirement not as a fixed point of life but as a chapter that enables freedom, professional breaks, and a sense of security.

The Road Ahead

‍Gen Z has the potential to achieve financial success, but they can’t get there on their own. With knowledge gaps holding many back and current systems tailored to older generations, this group needs additional support to thrive. By expanding access to financial literacy and offering professional guidance, we can help Gen Zers not only prepare for retirement but also create the flexible, fulfilling lifestyles they aspire to. And in doing so, we foster more equitable systems that benefit everyone. The future of Gen Z depends on education, accessibility, and adaptability. Armed with these tools, they’ll not only succeed—they’ll redefine what success looks like.

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‍- Lauren Mathews Fairey and Christa Mathews
Co-authors of "HowMoneyWorks for the Next Generation: Act Now or Pay Later"